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  • Tetra Tech: The Right Path To Undeterred Success
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    Despite the restrictions caused by the pandemic, Tetra Tech, Inc. (NASDAQ:TTEK) maintained its impressive performance in the previous fiscal year. Its sound financials helped the company sustain its continuous dividend growth throughout the years. Moreover, its stock continues to do well in the market as the bullish trend and undervaluation remain. Meanwhile, the company may enjoy more growth opportunities, given the achievements it had when FY 2021 opened.

    Analyzing The Sound Financials of Tetra Tech, Inc.

    Operating Revenue and Operating Costs

    The increasing demand and quality of services matched with the strategic pricing helped Tetra Tech, Inc. Generate an increasing amount of operating revenue. As the company got larger, its operations increased and became stronger. With this, it had substantially grown over the years.

    From 2010 to 2019, the operating revenue has already increased considerably. Despite the occasional ups and downs, the increase has been visible. From $2.21 billion in 2010, it rose by almost $500 million and reached $2.7 billion in 2012. In 2013-2015, it continuously decreased from $2.61 billion to $2.3 billion. It was driven by the wind-down of the Restructuring and Construction Management as part of the company's strategy to increase efficiency and achieve long-term growth. Since its completion in 2016, it bounced back to $2.54 billion and continuously climbed up to $3.1 billion in 2019. Also, the upward trend became smoother which showed undeterred growth. With this, it had average revenue growth of 3.3% every year as it already changed by $900 million. Indeed, one can observe the strength of the company's operations since it maintained its revenue above $2 billion despite the wind-down while keeping the decrease manageable to sustain its growth. Also, it easily adjusted as it easily bounced back and growth became more substantial since then.

    Meanwhile, FY 2020 has been a game-changer as the pandemic came and caused disruptions in different industries. Tetra Tech, Inc. Was not an exception as three-quarters of its operations witnessed its impact. During 1Q, revenue growth was substantial from $720 million to $840 million. During the latter part of 2Q, the pandemic struck many businesses and quickly caused challenges to their operations. Despite this, the operating revenue still increased by 11%. With this, the company had an impressive performance during the first half. The impact of the pandemic was more visible during 3Q and 4Q since the restrictions were at the peak then. As a result, the accumulated value of $1.45 billion was 9% lower than their comparative quarters. Nevertheless, the revenue remained adequate to sustain its operations, and the decrease remained manageable. With this, the operating revenue in FY 2020 amounted to $2.98 billion and only decreased by $120 million. One can see how the company was able to cope with the current situation. It tried to keep its operations at its best despite the quarantine measures. It remained intact and unfazed, given the substantial amount it generated. As less strict measures are being implemented and everything is gradually going back to normal, the operations may become better. The Linear Trend Analysis adheres to the observation as it estimated the operating revenue to rise from $3.2 billion to $3.7 billion for the following years.

    On the other hand, the operating costs followed the direction of the operating revenue. It exactly mirrors its upward and downward movement which showed the expansion and contraction of its operations. Also, the value was kept lower while the gap became wider which could suggest that the efficiency of the company has been increasing over the years. After the wind-down, their gap became even wider. From $1.9 billion in 2010, it increased to $2.7 billion in 2019 so Gross Profit increased from $310 billion to $410 billion. It showed that as time went by the company managed its costs well while increasing its production to realize higher earnings. Indeed, the wind-down was a strategic move on its part. Moreover, as the pandemic hit the industry, the operations of the company contracted but the efficiency remained. As a result, the operating costs remained lower at $2.55 billion while Gross Profit increased to $440 million. For the next few years, as the situation gets better, the operations of the company may grow again. With this, the operating costs may increase again from $2.76 billion to $3.1 billion. But as the increasing efficiency suggests, gross profit may climb from $450 million to $600 million.

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